Satellite Broadband Competition and Access is Improving, and FCC Policy Should Promote That

A December 14 article in PCMag reports that satellite broadband provider HughesNet is now offering residential subscribers services with advertised download speeds of up to 100 Mbps. This is up from prior offerings of up to 25 Mbps and 50 Mbps downloads. The improved capabilities are the result of the high geostationary orbit Jupiter 3 satellite this summer, which apparently has now been tested and is ready for service. 

According to the FCC's 2022 Communications Marketplace Report, "[a]s of year-end 2021, satellite operators served a combined 1.7 million subscribers in the United States." And subscriber numbers for GEO satellite broadband services offered by HugheNet and ViaSat do not appear to have grown but have perhaps declined slightly in recent years. (GEO providers as well as LEO entrants were subjects of my March 2018 blog, "Satellite Broadband Services Will Enhance Competition and Reach New Consumers.") But HughesNet's satellite service upgrade is a shot in the arm to broadband competition, and the Jupiter 3 will better enable HughesNet's geostationary orbit (GEO) broadband service to compete with Starlink's low earth orbit (LEO) broadband service. 

 

Speaking of LEO broadband, PCMag also reports that a recent filing with the FCC shows that Starlink now serves approximately 1.3 million subscribers, or about 59% of the total satellite broadband subscriber base. And it is reported that Starlink recently received approvals to conduct testing of the cellular Starlink system that will transmit data to unmodified smartphones using T-Mobile’s licensed spectrum in the 1910-195 and 1990-1995 MHz bands. 

 

(Much, much more could be said about the FCC's treatment of Starlink, and expect Free State Foundation scholars to weigh in on that in early 2024. For now, one ought to consider reading the order released by the Commission on December 12 and the separate statements by its members, including Commissioner’s Brendan Carr and Nathan Simington)

 

Future commercial availability of smartphone access to satellite broadband networks is another example of the broadband market's dynamism. For further background, see my March 2023 blog post, "Big Announcements on Deployments to Direct-to-Device (D2D) Satellite Services." Importantly, these broadband innovations that enhance competitiveness and expand access to unserved and underserved Americans ought to be promoted with a light touch regulatory policy and not by turning those services into heavily regulated public utilities, which the Commission has proposed to do. FSF's comments filed with the Commission on December 14 of this year make the case against imposing public utility regulation on broadband services – including satellite broadband. In order to be able to ensure that all Americans have access to broadband, it is essential that the Commission promote competition and innovation by satellite providers, not suppress it. 

Report Chronicles the Competitiveness of Today's Wireless Services Market

On December 11, CTIA released a report by Compass Lexecon titled "An Economic Analysis of Mobile Wireless Competition in the United States." The report provides an excellent overview of data points demonstrating that the wireless market is effectively competitive. And as the report rightly concludes, the competitive state of the wireless market means that imposing "utility regulation like that found in Title II of the Communications Act is both unnecessary andlikely to be a harmful deterrent to future investment and industry performance due to imposed costs and diverted resources."

The Compass Lexecon report cites strong capital investment in wireless network infrastructure:  $364 billion in nominal dollars invested 2010 to 2022. It also cites rapid network deployment and upgrades, with a 64% increase in cell cites activated over the prior decade and 5G deployment by 3 nationwide wireless providers to 98% of the population. Also, speeds have quadrupled over the past seven years and doubled over the past three years. The number of devices and data usage per wireless user have risen, with overall U.S. mobile traffic growing at a compound rate of about 55% between 2010 and 2022, and overall subscribership grew at a compound annual rate of about 5% during that same time span. And inflation-adjusted wireless price indices published by the Bureau of Labor Statistics declined by 18%-to-19% since 2017, with the price of wireless declining over the past 24-month period while the price of other products has risen 12%. 

 

Citations to those data points as well as to other positive indicators of wireless competition are contained in Compass Lexecon's report. It is a worthwhile read.  

 

On December 14, the Free State Foundation filed public comments with the FCC in its Safeguarding and Securing the Open Internet proceeding. In those comments, we cite the strong competitive conditions of the wireless and overall broadband markets and make the case that imposing public utility regulation on broadband Internet access services is unjustified and harmful to investment and innovation. Wireless services have thrived in a light-touch regulatory environment and wireless competition is an important check on anticompetitive conduct. Wireless consumers are not facing any actual or likely harm that warrants public utility regulation, and regulating wireless services as a public utility would not expand or increase deployment of those services to anyone who does not already have it. 

Tax Foundation Reports on Overtaxed Wireless Consumers, Including in Maryland

On November 13, the Tax Foundation released a report titled "Excise Taxes and Fees on Wireless Services Drop Slightly in 2023." It is the 14th edition of the Tax Foundation’s report on taxes, fees, and surcharges imposed by federal, state, and local governments on wireless services. According to the report, "Nationally, taxes, fees, and government surcharges make up a record-high 24.5 percent tax on taxable voice services.” Also, the report found that since 2012, the average charge from wireless providers decreased 26%, from $47.00 per line per month to $34.56 per line, yet wireless taxes, fees, and surcharges increased from 17.2% to 24.5% of the average bill.

The Tax Foundation's report helpfully describes the multiple types of taxes, fees, and surcharges that different governments impose on wireless services, and offers breakdowns and rankings for different states. Among the states, the report found that the state of Maryland had the 11th highest wireless tax rate at 15.91%. And presuming an effective federal USF tax rate of 10.83%, the result is that Maryland residents are hit with a combined federal/state/local tax rate of 26.74% on their wireless service bills. As the report observes, tax rates for wireless services in many states are significantly higher than general sales tax rates.  Maryland had the 7th highest disparity between wireless taxes and general sales tax, as Maryland's 15.91% tax rate for wireless services is much higher than the state's general sales tax rate. 

 

Rightly, the Tax Foundation's report identified serious policy problems that arise from state and local governments singling out wireless services for higher tax, fee, and surcharge burdens. The financial burdens fall the hardest on low-income consumers, many of whom live in wireless-only households for Internet access. And high taxes can harm private sector investment in wireless network infrastructure. Also, the goal of tax policy ought to be collection of revenues. To that end, tax laws should ideally be neutral toward consumer activity. It is a misuse of tax laws to target or try to change specific behaviors.

 

By shedding light on the problem of wireless over-taxation and ranking the states with the biggest wireless tax addictions, the Tax Foundation has provided an important public service. Maryland and other states should reform their tax policies and cut their taxpayers a break. 

2.5 GHz Band Spectrum Licensing Legislation Clears House

As I noted in a post to the FSF Blog last Thursday, two days prior the House Energy and Commerce Committee unanimously approved a bill granting the Federal Communications Commission (FCC or Commission) express authority to issue 2.5 GHz band spectrum licenses for which T-Mobile had paid $304 million prior to the lapse of the FCC's spectrum auction authority in March.

On Monday, the full House passed that legislation – the 5G Spectrum Authority Licensing Enforcement (SALE) Act (H.R. 5677) – by voice vote. Companion legislation approved by the Senate in September, S. 2787, now awaits President Biden's signature.

The text of the SALE Act is both short and straightforward:

In the case of any applicant for a license or permit for the use of spectrum in the band of frequencies between 2496 megahertz and 2690 megahertz, inclusive, that the Federal Communications Commission selected through a system of competitive bidding conducted under section 309(j) of the Communications Act of 1934 (47 U.S.C. 309(j)) on or before March 9, 2023, and to whom the Commission has not granted the license or permit as of the date of enactment of this Act, the Commission may process the application of the applicant during the 90-day period beginning on the date of enactment of this Act.

On numerous occasions, Free State Foundation scholars have emphasized the need for prompt action on the specific licenses won at auction and paid for by T-Mobile (here, here, and here) and, more broadly, reinstatement of the Commission's spectrum auction authority (here, here, here, here, and here).

In a November 17, 2023, letter to Representative Anna G. Eshoo (D-CA), FCC Chairwoman Jessica Rosenthal wrote that she was "encouraged" by the SALE Act – and that "[e]xpeditious action … will give the Commission the authority to issue the remaining 2.5 GHz licenses."

PRESS RELEASE: The FCC's Proposal to Convert Internet Providers Into Public utilities Should Be Stopped

Today, Free State Foundation President Randolph May and Senior Fellow and Director of Communications Policy Studies Seth Cooper filed comments in the FCC proceeding proposing to classify broadband Internet access service providers as common carriers. The FSF comments, which are available on FSF's website and which contain an Introduction and Summary, are 74 pages with 196 supporting footnotes. The comments demonstrate conclusively the Commission should not move forward with its proposal. 

Here are a few key excerpts from the Introduction and Summary of the comments:

The Commission’s proposal to convert broadband Internet networks into public utilities is legally unsupportable as well as unwise, unnecessary, and unjustified from a policy perspective. Stated bluntly, the Commission’s proposal, if adopted, by asserting stringent bureaucratic control over the practices and operations of private sector Internet service providers, would constitute one of the 21st century’s most flagrant government power grabs.

 

Supreme Court decisions such as West Virginia v. EPA (2022) have embedded the Major Questions Doctrine in the Court’s jurisprudence. And even if the Chevron doctrine is not directly overruled by the Court in the pending Loper Bright Enterprises v. Raimondo case, in effect its scope already has been meaningfully curtailed. As a result, the Commission cannot rely on the claimed ambiguity of Communications Act statutory terms as the basis for authority to reclassify Internet services under Title II. If adopted, the proposed reclassification decision undoubtedly would be a major rule falling within the Major Questions Doctrine. Transforming massive broadband Internet access networks built with over $2.1 trillion in private capital since 1996, and upon which so much of our nation’s economy is now dependent to function, unmistakably involves issues of vast economic significance. Reclassification of broadband services away from a lightly regulated Title I “information service” into a heavily regulated Title II “telecommunications service” would impact all broadband Internet service providers (ISPs), online edge companies, and residential broadband subscribers – whether through the regulation of revenues, prices, or service offering terms and conditions. “Net neutrality” regulation also has been a matter of vast political significance and considerable public controversy for two decades, up to and including Chairwoman Rosenworcel’s recent call for the public to “make some noise” and “raise a ruckus” so as to influence the Commission’s decision. The Major Questions Doctrine requires a clear statement of authority from Congress authorizing a major rule such as one that would impose public utility regulation on Internet networks that have thrived in a primarily market-oriented environment. But the lack of any such clear statement in the Communications Act almost certainly would be legally fatal, as even two former Obama Administration Solicitors General have concluded.

 

Surely the case for Title II reclassification is far weaker in 2024 than it was in 2015 – and it was demonstrably weak then. Myriad gloom-and-doom predictions about the “end of the Internet as we know it” after repeal of the Commission’s short-lived public utility regulation were quicky proven false. That the Notice cannot point to any real-world instances of ISPs blocking, throttling, or otherwise harming consumers ability to access lawful Internet content is readily explainable by economic realities. Increases in broadband network availability, competing alternatives, and broadband speeds have followed in the wake of Title I reclassification. The competitiveness of the broadband Internet access services market has increased since early 2018 due to the expansion of fiber, the rapid nationwide deployment of 5G mobile and 5G fixed wireless access (FWA) services and new satellite services, as well as the launch of DOCSIS 4.0 cable broadband and hybrid cable mobile virtual network operator (cable MVNO) services. And, significantly, U.S. broadband networks passed the ultimate stress test by successfully accommodating dramatic spikes in Internet traffic and actually improving service during the lockdowns of 2020.

 

An additional problem is that the Commission’s proposal opens the Internet to rate regulation. Title II, at its core, is a rate regulation regime. The Notice does not propose to forbear from applying Sections 201(b) and 202(a); it suggests the agency will only refrain from ex ante rate regulation, not ex post. Those statutory provisions would impose on the Commission a positive duty to consider complaints that rates charged by broadband ISPs are unjust or unreasonably discriminatory. The Notice also suggests rate regulation with its proposed ban on paid prioritization; its assertion of agency authority over network interconnection agreements that set pricing for peering; and its possible ban on “free data” mobile plans. Rate regulation will defeat what should be the Commission’s priorities – promoting network investment and deployment, along with consumer choice and innovation.

 

In a surprise to many who have observed the two decades-long policy debate over “net neutrality” regulation and “Internet openness,” the Notice tries to reframe proposed Title II regulation of broadband services into a national security and public safety measure. But it is highly doubtful that regulating ISPs as public utilities will make the nation and its people more secure and safe. The Notice’s security and safety rationale for public utility regulation is a classic case of the tail wagging the dog.

 

The Commission also proposes to adopt an impermissibly vague “general conduct standard” as an admitted “catch-all backstop” that would restrict an unknown and unknowable number of network practices that the Commission believes might “unreasonably disadvantage” retail service end users or Internet edge providers like Google and Facebook. This proposed “catch-all backstop” consists of several unclear factors that are not tied to any safe harbors, ascertainable economic theory, or legal precedents that would provide predictable application. The elasticity of those factors would enable the Commission to restrict nearly any network practice it chooses. Also, it appears that the Commission’s enforcement rules, in many instances, would require ISPs to prove that they comply with the agency’s ad hocdeterminations regarding what technical network practices best promote Internet openness. The result would be a gross expansion of agency power over private networks and a negative impact on innovation and investment. The “general conduct” standard would be the Commission’s tool of choice to ban popular “free data” mobile plans and other innovative offerings.

 

Aside from the agency’s lack of legal authority already described above, the Commission’s proposal to regulate broadband ISPs like common carriers under Title II raises significant issues under the First Amendment. The proposed rulemaking would burden broadband ISPs’ First Amendment right to make editorial decisions involving paid priority arrangements as well as “free data” or “sponsored data” offerings. Although an ISP can claim no First Amendment right to hold itself out as a neutral and indiscriminate pathway but then conduct its operations differently, an ISP likely has a First Amendment right to qualify the meaning of that offering in its written terms of service to include certain traffic priority, speed, pricing, content, or other terms. Moreover, the Commission’s suggestion that its proposed regulation is likely to be upheld as content-neutral and subject to intermediate First Amendment scrutiny is questionable because the Commission is unconcerned with findings of market power.  

Legislation to Liberate 2.5 GHz Spectrum Reaches House Floor

On December 5, the House Energy and Commerce Committee unanimously passed a bill that would grant the Federal Communications Commission (FCC or Commission) clear authority to issue licenses for spectrum in the 2.5 GHz band won at auction and paid for by T-Mobile. It now heads to the House floor.

The 5G Spectrum Authority Licensing Enforcement Act (H.R. 5677) is companion legislation to S. 2787, a short and straightforward Senate bill that, as Free State Foundation Director of Policy Studies and Senior Fellow Seth L. Cooper described in a September 15, 2023, post to the FSF Blog, would do just one thing: establish a 90-day window within which the FCC incontrovertibly is authorized to grant those licenses for which T-Mobile paid $304 million but the agency had not yet processed when the Commission's spectrum auction authority lapsed on March 9, 2023. S. 2787 passed the full Senate without amendment by Unanimous Consent on September 21, 2023.

The underlying question – whether the FCC legally may grant these specific licenses in the absence of general spectrum auction authority – is open to debate. In a November 17, 2023, letter to Representative Anna G. Eshoo (D-CA), Chairwoman Jessica Rosenthal reiterated the Commission's position that it is barred by Section 309 of the Communications Act from doing so – and that, "[if] f the Commission were to expend funds to continue to process the licenses won in Auction 108 notwithstanding the sunsetting of our authority to do so, it would put the agency staff at risk of criminal penalties for violating the Antideficiency Act."

On the other hand, and as Mr. Cooper highlighted in a July 2023 blog post, Joel Thayer has made a "convincing case" that the agency retains the requisite legal authority to proceed even in the absence of general spectrum auction authority.

As H.R. 5677's sponsor, Congressman John Joyce, M.D. (R-PA), stated in a press release, "[t]he 5G SALE Act would cut the red tape that has kept Pennsylvania families from accessing the high-speed internet that is vital for remote workers, students who use the internet to learn from home, and patients who use telehealth to heal from home."

PRESS RELEASE: FSF Files Comments in Response to the FCC’s “Section 706” Inquiry

 

Free State Foundation President Randolph May and Senior Fellow Andrew Long filed comments with the FCC today in response to the Commission’s “Section 706” Inquiry.

Immediately below are four paragraphs excerpted from the beginning of the Introduction and Summary of the Free State Foundation’s extensive data-rich authoritative comments.

 

The plain text of Section 706 posits two straightforward empirical queries. One, to what extent is "advanced telecommunications capability" – that is, broadband Internet access at sufficient speeds to satisfy actual consumer needs – currently available to all Americans? And two, with respect to those locations where "broadband" is not yet available, is it being deployed in a reasonable and timely fashion? Thanks to the Broadband DATA Act and the Commission's implementing efforts, for the first time interested parties participating in a Section 706 inquiry have at their disposal an official, communal data source upon which responses can be based: the National Broadband Map.

Consequently, these questions never have been so easy to answer – nor have the responses ever been so incontrovertibly clear. Data recently made available by Chairwoman Jessica Rosenworcel (though curiously not included in the Section 706 NOI itself) reveals that, as of May 2023, only 7.2 million out of a total of 115 million serviceable locations – just over 6 percent – were unserved. Incredibly, and at the same time the accuracy of the data was improving, the number of unserved locations shrank by more than 13 percent, or 1.1 million, in only six months. Thus, with reference to the specific metric called for by Congress and developed by the FCC itself, broadband undeniably is both available and being deployed in a reasonable and timely fashion.

Further, the Biden Administration's "Internet For All" initiative, which encompasses a dizzying number of federal subsidy programs administered by a worrisome number of different agencies, is in the process of injecting tens of billions into the network infrastructure construction pipeline. As touted in a June 2023 White House press release regarding the $42.45 billion Broadband Equity, Affordability, and Deployment (BEAD) Program, "President Biden and Vice President Harris are delivering on their historic commitment to connect everyone in America to reliable, affordable high-speed Internet by the end of the decade" (emphasis added).

Thus, there should be no doubt: $2 trillion and counting in private investment since 1996 has brought broadband to the vast majority of Americans, and existing federal subsidy programs are doling out tens of billions so that even the most cost-prohibitive locations are being connected. There is an inevitable lag between the commitment of funds and when networks become operational – one that the Commission could do more to shorten, especially with respect to pole attachment disputes, permitting, access to rights of way, and other bureaucratic red tape – but with an absolute minimum of $140 billion in taxpayer dollars committed to closing those digital divides that remain, not to mention matching funds as well as state and local money, there is every reason to conclude that nothing is standing in the way of universal broadband availability.